Cafeteria Plan

A cafeteria plan is designed to allow each employee the flexibility of choosing from a menu of available benefits

Medical Insurance Premiums

Any insurance premium paid by the employee under the employer's group sponsored medical and detnal program is a deductible expense under the Cafeteria Plan. The premiums paid may include individual as well as dependent family coverage.

Disability Insurance Premium

Insurance Payments for disability coverage are also allowable under the Cafeteria Plan. Existing coverage may be included provided it is offered under a group basis. Warning: For disability coverage only, if you deduct the premium under the Cafeteria Plan, then any ultimate benefit received in the event of your being disabled would come to you as taxable income.

Life Insurance Premium

Any life insurance premium payments required under your group benefit program may also be deductible under the Cafeteria Plan. In order to qualify, the coverage must be classified as term insurance and when taken into account with all employer provided coverage, the deductible amount may not exceed $50,000 in death benefit. For coverage that exceeds $50,000, you will receive a 1099 form at year end representing the premium cost for the excess.

Cancer Insurance Premium

If applicable, this premium expense is deductible in the same manner as medical insurance by electing this benefit on this enrollment form.

Accidental Death & Dismemberment Premiums

Accidental Death & Dismemberment coverage is fully deductible under the Cafeteria Plan. This premium expense is treated as a medical insured benefit and is not subject to the $50,000 ceiling limit.

Flexible Spending Accounts

A Flexible Spending Account (FSA) provides a method for employees to pay for dependent care or medical-dental expenses with pre-tax dollars through payroll deduction. The employee funds the FSA each pay period, in equal amounts, and draws against the accont as expenses are incurred under a self-funding arrangement.

In order to draw against this account, the employee needs to substantiate the expense by submitting a request for payment form along with a receipt or bill indicating date and amount of the expense. Any expenses reimbursed under a FSA must be incurred during the period of coverage and not when the participant is formally billed or charged for the expense.

The period of coverage is defined as a 12 consecutive month plan year, with an exception for short first plan years. Employees will receive ongoing benefit statements throughout the plan year showing the account activity.

Medical Reimbursement Account

This account allows you to pay for out-of-pocket medical expenses that are not covered under your medical insurance program. Eligible medical expenses include items such as plan deductibles, co-insurance payment, prescription costs, doctor visits, eye glasses, hearing aids, prescribed drugs and medicines, elective surgery, cosmetic surgery, wellness programs, dental, orthodontia, and any other medical expenses prescribed by a physician and not covered by a medical insurance program as described under Internal Revenue Code Section 213.

Dependent Day Care Amount

This account allows you to pay for out-of-pocket expense incurred for day care services of eligible children and dependents. Eligibility is defined as children up to age 12, handicapped children over the age of 12, a handicapped spouse, or a handicaped parent. Day care services is defined as a babysitter, a day care center, or a before school or after school program. When submitting requests for payment, the employee must provide name, address, and social security number of the individual or organization providing the care.

Benefit Election Rule

At the start of each plan year, you must choose ("elect") which benefit portion(s) of the plan you will participate in and the dollar amount of payroll deductions for each pay period during that plan year. New elections are made at each subsequent plan year.

Once an election has been made and payments into the Cafeteria Plan have started, they cannot be "revoked" (stopped) or changed at any time during the current plan year, with one exception.

You may revoke a benefit election after the coverage or plan year has commenced and make a new election for the remainder of the plan year in the case of a life event. A life event is defined as a marriage, divorce, birth of a child, adoption, death of family member or change in your employment status for yourself or your spouse.

"Use It Or Lose It" Rule

The Internal Revenue Code states that in order for the plan to qualify for certain tax advantages, there must be an "element of risk" on the part of the participant, and the "use it or lose it" rule provides that risk.

Under a Flexible Spending Account, when you elect to have money withheld before taxes are calculated, and have those monies pay for benefits that are considered non-taxable, the amount withheld for that plan year must be used to pay for expenses that are incurred in that year. Any unused money at year end may not be rolled into the next plan year, and is therefore forfeited. It is important to use up your full account during the plan year.

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